Monday, April 28, 2014

February 2014 Employment

The February numbers aren’t appealing: employment growth is crashing (‘000):


Job creation has been negative in four out of the last five months – a cumulative reduction of about 400k jobs. That’s a serious divergence between the labour force numbers, and the growth of the economy as a whole.

Unemployment however, has remained fairly steady (‘000):


There’s been a net increase of just 2k over the same period, and an unemployment rate that is barely creeping up (% labour force):


The reason for these divergent trends is a declining labour force participation rate (ratio to labour force):


The chart above includes an indicative trend (including monthly dummies and a structural break in January 2013), which suggests the drop in the LFPR over the last couple of months was “normal”, although the movement over the past year was not.

That, I suspect, was mainly a result of the imposition of the minimum wage in January 2013, and its enforcement in January 2014. As an aside, wage growth has been blistering over the same period – over 8.0% in the manufacturing sector since June, and for all sectors over the past two years.

I really can’t say whether the excessive number of people leaving the labour force is something that will keep continuing, but if I had to bet, I’d say it has. There’s also a lot of “noise” in the employment statistics, so that’s something to bear in mind as well.

Nevertheless, this is something to keep an eye on for the immediate future.

Technical Notes:

February 2014 Employment Report from the Department of Statistics (warning: pdf link)


  1. What about value of those jobs created ? How many high income jobs created vs cheap labor jobs. Do we need more foreign labor or more professional in our economy ? That shall be the main question..

    1. Those aren't questions that can be culled from the employment statistics, and in fact are quite separate issues. In any case, I'm wary of creating high income jobs without a corresponding increase in supply. All that would do is bid up wages at the high end, without really benefitting anybody else. Fixing that problem involves a whole lot of other issues which have nothing,to do with employment.

  2. High income nation need high income jobs, not just jobs, otherwise social imbalance will worsen.. Supplies shall not be an issue, we have plenty of educated and experienced Malaysian to fill the gap, lots of them left Malaysia because not much demand anyway. More emphasis should be put on quality investment, not just mortar and brick just to inflate FDI number and dumping of foreign workers...

    1. 1. I'm afraid you're mistaken. Even if we bring back every skilled Malaysian, it wouldn't make a dent in the skills shortage. This is a global problem, not a Malaysian one. The nature of work has changed dramatically in the last twenty years, which is one reason why within-country inequality is generally increasing globally. Even Korea, with near 100% tertiary enrollment rates, has a skills shortage.

      2. The key differentiator between high income and low income nations is that "high income" jobs aren't really synonymous with "high skilled" jobs. Low skilled work is just paid better in high income economies. High income nations = high cost nations. The trick is to achieve this without losing competitiveness.

      3. Most of the research on immigrant workers show that low skilled foreign workers tend to increase the income level of domestic workers. I don't think having a large foreign labour force (even of the cheap variety) is necessarily a disadvantage.

    2. More links on this issue:

  3. I don't know how important the numbers here are right now.

    I'm having a slight skepticism over the numbers because of the large increase in LF over the last year. I have a suspicion that it's all technical rather than the real stuff on the ground. The LF increased by about a million in less than 2 years and I expect that might have something to do with the recent job creation numbers.

    I think we may have to wait for a couple of months for the numbers to stabilize before the they could be credible again. Like you said, the series is already volatile and the large increase in the LF recently might add up to the noise.

  4. Kerja jawatan rendahApril 29, 2014 at 5:34 PM

    You said "The key differentiator between high income and low income nations is that "high income" jobs aren't really synonymous with "high skilled" jobs. Low skilled work is just paid better in high income economies. High income nations = high cost nations. The trick is to achieve this without losing competitiveness."

    What trick do you mean? Is it achieve High Income Nation and at the same time a Low cost Nation?

    If yes,,,this mean the workers will continue receiving suppress wages. In addtional to that GST implementation will cause inflation and this will burden the poor masses.

    1. There is no way a high income nation will have a low wage base.

      The trick isn't in keeping costs low, but to increase productivity so that growth has a stable foundation, and increase in costs is matched by increase in output. If this isn't achieved, we will end up like Greece. High wages, low productivity growth => current account deficit, weakening currency, lower income relative to tradeable goods

  5. This comment has been removed by a blog administrator.

    1. My late father told me about what was called EDUCATED UNEMPLOYED in Sri Lanka, where even horse drawn carriage drivers have a degree, whilst those who went to university and failed tagged "BA (Failed)" behind their name.

      However, I guess you will find many Bachelor IT graduates working a baristas in Starbucks in Malaysia today.

      Welcome to the Information & Services economy.

      Also in the "great, almighty," US of A, the Silly Con Valley hasn't helped to solve the unemployment problem.

  6. Intresting.

    I thought that with the Moribund Super Corridor, K-Economy, ETP, etc., Malaysia is heading towards a high-income economy by the year 2020.

    I guess we need more CON-sultants who are paid high incomes.

  7. hahahahaha

    higher LFPR= Minimum Wage ......hahahahaha......wink wink ....

    Minimum wage = lower job creation ...... and soon to be higher unemployment figures???.....hahahahahahaha wink wink

    Any economist with a grain of sense — which is to say, maybe half the profession?"

    Which brings up the old joke: A man is in an accident and suffers severe brain damage. His doctor tells him he is lucky because in the old days there was nothing they could have done for him, but now with modern technology, they can give him a new brain. "A new brain, the patient says, how much does it cost?" "Well the doctor says, that depends on the type of brain you want. A doctor's brain is $1,000 an ounce, a lawyer's brain is $5,000 an ounce, and an economist's brain is $10,000 an ounce." "Gee, the patient says, why are the economist brains so expensive?" The doctor replies, "Do you know how many economists we have to use to get an ounce of brains?"


    should be a good read for all dealing with a pseudo-science...hahahahhahahaahhaahahha

    1. @anon

      I've found both effects already happening: